KPPU turns up the heat on Carrefour amid unfair business allegations

Retail companies, including French retail giant Carrefour, will be required to provide reports on merger and takeover plans to avoid unfair business practices and to help protect small suppliers in the sector.

Business Competition Supervisory Commission (KPPU) member Muhammad Iqbal said Tuesday the commission would issue major retailers next month with a guideline for the “pre-notification” of mergers and acquisitions.

“Such a guideline is part of our authority to supervise business competitions as stipulated in the monopoly and unfair business competition law.”

“The commission will slap hefty financial penalties should the retail companies fail to report, especially if the mergers and acquisitions are proven to create an unfair business (climate),” Iqbal said.

The announcement comes during the KPPU’s ongoing investigation into alleged unfair practices by PT Carrefour Indonesia over its procurement of a 75 percent stake in local retailer PT Alfa Retalindo in January.

With this acquisition, according to the KPPU, Carrefour now has a total of 58 outlets, 34 of which are owned by Alfa. Last year, Carrefour reported total sales of Rp 7.2 trillion (US$7.8 billion), up from Rp 5.7 trillion in 2006.

The figure dwarfed those of local retailers PT Ramayana Lestari and PT Matahari Putra Prima, which recorded Rp 4.8 trillion and Rp 4.3 trillion, respectively, according to research firm Partisipasi Indonesia.

Carrefour’s plans for expansion did not end there. The company is reportedly in talks to purchase a controlling stake in PT Makro Indonesia, a local unit of Dutch retailer Makro.

Should the acquisition be made, Carrefour will dominate the country’s hypermarket, supermarket and grocery sectors.

Carrefour corporate affairs director Irawan Kadarman said the company would fully comply with the KPPU’s policies.

The company has also attracted criticism from local small and medium retailers, including an operator of traditional markets, which accused it of conducting unfair business practices by setting up most of its outlets in the city center.

However, Irawan denied the accusation, saying the company had secured the necessary legal licenses from relevant authorities to operate its outlets.

The KPPU is also investigating allegations that Carrefour has abused its dominance by charging new local suppliers, especially small ones, with high listing fees, according to Iqbal.

A listing fee is a sum paid by suppliers to retailers to get their products on the retailers’ shelves.

The expensive fee has reduce the chances of suppliers in selling their products in the outlets.

“We are collecting some important data to support our investigation slated to be wrapped up this year,” said Iqbal.

Finance director of the Indonesian Food and Beverage Association Yusuf Hadi said the association was urging the KPPU to regulate trading terms for suppliers in the event that Carrefour becomes the dominant player.

“The KPPU can possibly determine the percentage of the allowed listing fee. If not, suppliers will have to pay much for small profits,” he said. [The Jakarta Post]

Six mobile operators guilty of price fixing

Six mobile communications operators have been found guilty of cartel-like price fixing for text message services (SMS), causing consumers some Rp 2.8 trillion (US$302.4 million) in losses.

The six operators found guilty by the Business Competition Supervisory Commission (KPPU) are Excelcomindo Pratama (XL), PT Telekomunikasi Seluler (Telkomsel), PT Telekomunikasi Indonesia (Telkom), Bakrie Telecom, Mobile-8 Telecom and Smart Telecom.

“The six mobile providers were proven to hold arrangements among them to fix the prices of text messages at between Rp 250 and Rp 350 from the year 2004 until April 2008,” head of the KPPU’s panel of judges Dedie S. Matadisastra said.

No proof, however, was found on other parties under investigation by the competition watchdog: PT Indosat, Hutchison CP Telecommunications and Natrindo Telepon Seluler (Axis).

The KPPU ordered Telkomsel and XL to pay fines of Rp 25 billion each, while Telkom, Mobile-8 and Bakrie have to pay Rp 18 billion, Rp 5 billion and Rp 4 billion, respectively.

As for Smart Telecom, Dedie said, “no fine is being imposed on the provider, as it was only involved in the price fixing agreement in September 2007, during its commercial launching.”

“Smart is the newest entrant among them, making its bargaining position the weakest.”

XL and Telkomsel have been slapped with the biggest fines because while Telkomsel benefited the most from the practice, as it had the most customers, XL — according to the probe — was the most active firm in terms of ensuring other cartel members follow the agreement.

The KPPU said tariffs imposed by the operators were artificially high, adding that by its own calculation tariffs should not be higher than Rp 114 for one short message with 160 characters.

The KPPU carried out its preliminary investigations on the price fixing agreements among mobile telecommunications providers last year from Nov. 2 to Dec. 13, 2007. The commission continued its investigations until March 26, 2008.

According to the KPPU, in July 2007 the Indonesian Regulatory Agency for Telecommunications (BRTI) held a meeting with the Indonesian Cellular Telephones Association (ATSI), where ATSI members agreed to cancel all price fixing agreements among them.

However, “until now, none have imposed new text message tariffs, indicating that they are still under the cartel agreements,” Dedie said.

Telkomsel lawyer Ignatius Andy denied any wrongdoing by his client.

“We will probably appeal. The text message tariffs imposed by Telkomsel are competitive and in fact benefiting our customers,” he said.

XL lawyer Stefanus Harianto said he would talk with his client before making any further move.

“But there’s a big possibility we will appeal,” Stefanus said. [The Jakarta Post]